PGN says capex on SSWJ pipelines project increases by 12.2%

State-owned gas distributor PT PGN said its capital expenditure (capex) on the South Sumatra-West Java (SSWJ) pipelines project had increased by 12.2 percent from its original budget, mainly due to hike in steel price.

PGN said in a statement that capex on the SSWJ Phase I increased by 4 percent to US$492 million, while on the SSWJ Phase II lifted to $619 million, or about 19 percent compared to its original budget.

PGN said steel price, which is accounted for about 50 percent of material procured for the project, had increased to US$1,400 per ton from $700-900 per ton in original budget.

The limitation of offshore equipments in market also made the higher contract price proposed by contractors as demand for them jumped, PGN said.

The SSWJ Phase I is dedicated to transport natural gas from Pertamina?s gas field to PGN?s industrial customers in the western part of West Java. Meanwhile, the SSWJ phase II is aimed to deliver gas from ConocoPhillips-operated Corridor gas block in South Sumatra to PGN?s industrial customers in the northern part of West Java.

The cost hike in the SSWJ Phase II includes the additional construction of a 34-kilometer pipeline to link the project with the West Java gas distribution network, it added.

The SSWJ I and II which are now under construction are expected to commence its operation in March, 2007 and in November this year, respectively. (godang)